All Forum Posts by: Dan Mahoney

@Account Closed is correct that the Fulton/Vesta relationship is somewhat unique, but I do not think there is anything in Georgia law preventing Mr. Ferdinand from selling you the existing liens on these properties.  I'm sure he prefers to deal with buyers who purchase in bulk, but he also likes to maintain his high collection rates.  Maybe send in a written offer to purchase the liens you want at full face value plus applicable interest/penalty and see what happens?  I've never tried this myself.  You may get no response at all but it doesn't cost anything to try.

@Jimmy Kennedy I think you realize that your analysis had a few problems.  But I want to add a couple points from a local's perspective while you go back through your analysis.

First, you need to check out the neighborhood where this property is.  If you spent a couple hours walking around there, you'd see that while there are some signs of revitalization, Vine City is an economically depressed neighborhood with many blighted properties like this one.  Right off the bat, I would say that paying $60k for an uninhabitable building in Vine City should be out of the question.

Second, you can't take the seller's optimistic estimate of $3,200/month rent potential at face value.  $800/month seems high for a one bedroom apartment in an ugly concrete block box in a challenging Atlanta neighborhood, even if newly renovated.  I'd say $800/month is closer to what you would get for a nicely renovated single-family house in this neighborhood.  For these 1BR apartments, you'd be lucky to get $600 per unit, and it might be closer to $500, depending on how nicely you renovated the building.

Third, you aren't going to find good comps for ARV because you won't be able to find apples to apples. The best comp might be the quad next door which sold for $52k a year ago, but you won't know the condition it sold in (hint - it was probably in MUCH better shape than the one you are looking at). If you can't do valuation based on comps you have to use income. So your income better be accurate.

TLDR - if you buy this thing for $60k you will regret it.

@Joseph Thomas I have never personally done a quiet title action (you only need to do this to sell or mortgage the property) but I have read several superior court cases to understand how they work.  The lien holders are wiped out by statute when you foreclose the right of redemption, so to challenge the quiet title a party would have to assert that something in the tax assessment/ collection/ fifa/ transfer/ servicing/ auction/ deed/ barment process was done improperly.  Litigating this is complicated and would only be worth doing if there were significant value at stake.  And if there were significant value in a property, it would have made sense for the bank, lien holder or owner to redeem the tax deed during the first year.  All that being said, there is enough complexity in the tax sale process that title insurers see these properties as too risky to insure without a quiet title.

A local real estate attorney like @Sam Bagwell would probably have some good war stories.

@Nick Costello I have used 100% of a credit limit before and probably took a 50 point ding on credit score.  Remember they look at this on a per account basis so even if you have zero or low utilization on your other accounts, if you go over 30% on one account it will hurt your credit score, and will hurt more if you go over 50%.  Fortunately, utilization is only measured currently, so there is no "memory" of past utilization.  Once you pay off the trade line your score goes all the way back up the next month.

In my experience Amex, Chase, BofA, Barclays, Capital One can all be pretty generous with credit lines, however, the easiest way to get big credit lines from these banks is to have other big credit lines showing up on your credit report (they are competing with each other).  If you are trying to build up to this, google "Amex 3x CLI" for a discussion of how to systematically work your way up to larger credit lines from Amex.  Note, however, that Amex does not do balance transfer checks.

Here is tip if you are concerned about utilization and credit score:  Small business credit card tradelines usually don't show up on your personal credit report (unless they are from Capital One, which I learned the hard way).  You are still personally guaranteeing the account, and the inquiry from the appplicaiton will show up on your credit report, but not the utilization if the account is kept in good standing.

@Chris Schuler Often times the "investors" are just leaving the properties to rot and the Atlanta Police Department code enforcement division has to board up the house or pay VPS/VIP to put up their metal barriers to keep squatters out.

There is even a program to use jail inmates to do this work.  Even with this program there are way too many open/vacant properties for the City to keep up.

When the City boards up an abandoned house, they put a lien on the property for the cost of the work.  However, in my observation, they do not try to foreclose on the lien, they just let it sit.  Every once in a while they will demolish a house if it gets really dilapidated.  

The owners of blighted properties are supposedly subject to criminal prosecution, but again, as far as I've observed, the City does not put a lot of energy into finding and charging the owners criminally (with one notable exception).  I tend to think issuing bench warrants for arrest would get these owner's attention.

@Danielle C. Yes, you can use a credit card advance to fund your deal. I am getting "balance transfer checks" from credit card companies every week offering 0% interest for 12-18 months (though in the fine print there is usually a 1-5% fee up front). This timeframe could work for a flip and would be a lot cheaper than hard money. If you are getting these offers you can just write a check to your LLC and then use the LLC to buy the house and fund the rehab. You'd need to complete the flip before the 0% promotion rate ended because it usually jumps up to over 20% after that.

However, just because you can do something does not mean that you should. Your comment expressing concern about "putting our personal home in the mix" suggests that you may not appreciate the level of risk you are taking on with a 100% debt financed deal, minimal cash reserves, and no experience. You will not avoid a personal guarantee under any circumstances, which means your home will be at risk whether you do the HELOC or not.

You should only invest (or borrow) an amount that you can afford to lose (or repay) if the deal goes bad. I am concerned that you are biting off more than you can chew.  I sincerely wish you the best. 

@Keaton Roberson if you are comfortable with living there you will probably also be comfortable with the tenants you can attract.  

A lot of the appreciation in Adair Park has already happened but there are still a handful of blighted properties to be cleaned up before you'd say the transition is complete.  Multi-family probably won't appreciate as much as single family, so that is something to consider for your strategy.

@James Allen @Account Closed All of you are right.  James, you are right that the fundamentals in Atlanta look strong for single family homes (less so for multi family, because a lot of new supply is coming online).  Vivek and David are right that your physical distance and unfamiliarity with the area add significant risk to your investment.  I live, work and invest in the City of Atlanta, and in the current market, there are parts of town where I am an active buyer and there are parts of town where I would be a seller if I owned something.

So James, you may have made a good investment and you may not have, but you shouldn't worry that Atlanta is fundamentally a bad place to invest.  If you would like to PM me with the address of your investment property I can share my thoughts on the specific location.  I'm possibly biased as a resident of Atlanta, but I'm not selling anything.

@Raj I. I do use a Georgia LLC for tax deeds. There are a few reasons for this but the main driver is the fact that in Georgia the county tax commissioner has an implied lien over ALL real estate owned by a given taxpayer, not just the property or properties with overdue taxes. I would rather keep my personal residence and "normal" rental properties separate from the messy world of tax liens and deeds.

I think asset protection planning is a fascinating practice area, but is most relevant to high net worth individuals who are in lines of business that make them a target for lawsuits. By high net worth I'm thinking at least $5M. For the mom and pop landlord, flipper, or wholesaler, I think asset protection schemes that utilize NV/WY holdco, Belize trust, etc., are overengineered for their purpose and are likely to be done wrong anyway. I do believe there is merit in following simple best practices that have asset protection as a side benefit: 1) Taking out large mortgages on properties to minimize equity; 2) Having adequate liability insurance; 3) Contributing assets to retirement plans and other protected vehicles; 4) Dividing ownership of family assets between yourself, your spouse, and your children; and, especially, 5) Running an honest business and treating people fairly. Holding in an LLC or Trust doesn't hurt, but as is widely discussed in this forum, owning in your own name is often best to maximize debt financing (which itself is a good layer of asset protection).

Just as a reminder, I am not a lawyer and this is just my opinion as an individual investor.  You should get advice for your specific circumstances.

I know I'm a couple days late to this thread but had a couple thoughts to share.

The rapid price appreciation in the neighborhoods @Patrick Young described isn't random, it's what happens when an intown neighborhood transitions from being primarily rentals to being primarily owner-occupied.  This changes the basis of valuation from return on investment (how investors think) to mortgage availability/affordability (how homeowners think).

It seems like the beginning of this transition happens when retail price of a typical home crosses $100k.  Next thing that happens is the vacant and boarded up houses get fixed up.  Then the renovations start getting a nicer and the homes sell for $200k+.  When average values hit $300k nearly all of the rentals have been converted because it doesn't make sense for anyone to hold a $1,200/month rental anymore and the investors all sell.

To @Michaela G. 's point, if you move to a place that you think is in the path of this transition you will see significant appreciation if you are right.  If you are wrong, you will probably be no worse than where you started and will probably have a nicer place to live than whatever you are paying $700/month for today.  Compare that to spending $250k on a neighborhood that is halfway through the transition and then a recession hits, foreclosures start happening, and home values drop back to rental levels.  You could get upside down pretty easily in that scenario.

I get that you actually have to live in the place so that may override your investment considerations.  All depends on your objectives, I suppose.